Manage Your Credit Card

  A lot of people don’t really know how to use their credit cards. Nevertheless, it’s very important to learn the rules of handling credit cards for success and ease of mind, encouraging sound spending habits for new and experienced credit card users alike. Here are the three basic laws for success with credit cards:

1. Buy only what you really need. It’s a matter of responsibility. Get to know all of the responsibilities in owning and using a credit card, and please make wise decisions about the items you really need to purchase versus the ones you simply wish to have. It’s important to learng to distinguish between Need to purchase and Wish to have. By using your cards responsibly we mean you should learn to recognize which things you need and which things you just want. If you use your credit card to buy things you can’t afford today, chances are that you won’t be able to afford it tomorrow, or next month, and you will quick and steadily get into debt. Then don’t live a borrowed lifestyle, be true to yourself.

Responsible purchases help to keep lower balances, which are easier to manage and pay off than those that are higher. Further, lower balances helps you maintain a good credit score, as a large part of your credit score takes into account the levels of debt you have raised. Ideally you should stay within 30% of your credit limit.

Responsibility also means remembering your credit card payment. If you cannot make your monthly payment on time, let your creditor know in advance. Call him, explain the problem and ask that any late fees be waived.

2. Rather than seeing your card as debt or emergency funds, see them as liabilities that have to be paid. It’s about focus. Don’t recur to your credit card to make everyday purchases. Goods and items such like clothing, apparel, and gas shouldn’t be purchased with a credit card. If you use your credit card as a substitute for cash you may quickly grow debt. It’s true that some transactions may require credit cards (buying an airline ticket, renting a car or shipping an overnight package), but prefer cash or debit cards when possible.

3. And pay off your cards in full every month (or at most every two months). It’s about being smart. If you pay your card balance in full each payment cycle, you can use the bank’s money interest free for about a month. If you don’t pay your bill in full each month and make further purchases you will soon find yourself clobbered by debt (specially interest payments) on a rocketing balance. This is very, very dangerous to your financial health and can heavily hurt your credit score. Similarly, keep out of the habit of making minimum-only payments. This bad habit increases the amount of time it will take to pay off your credit card debt, and also increases interest payments. In short: to pay your debts off cheaper and quicker, pay as much as you can on your balance each cycle.

Being smart also means that you should negotiate a lower interest rate whenever possible. Remember that interest rate determines how much you pay for carrying a balance on your credit card. Study your interest rate on your credit card periodically to be sure you are getting the best deal possible. And get rid of credit cards with high and hard interest rates (but take into account that closing cards that still have a balance, or cards which make up a significant part oy tour credit history may hurt your credit score.)

Finally, remember that credit cards are essentially high-interest loans. Using them to buy everyday goods (household items, apparel, food, etc) sounds silly, and that’s why credit card holders who don’t pay their bills in full each month are not being smart. Certainly, if you don’t have the money to pay for an item now, chances are you won’t have it after the credit card bill arrives. So be smart.